Introduction

Background of the Study

Oil has been a significant source of energy for many decades now. Oil is a versatile product that has
many uses. It is usually used for transportation, manufacturing, heating and so much more. And as such,
it is safe to say that oil has been a necessity that supports the economy of a country, in many ways
possible that is why the continuous rise of oil prices over the years should have everyone be alarmed and
become aware of the potential effects it can have to our day to day lives.

Changes in the oil price are the global phenomena that are felt by each country in the world. With these
changes, the impact of the oil price is in particular influential in determining the economies of emerging
countries as these economies are not financially stable and are weak to the influences of external shocks.
Another main impact that keeps the oil price changes is on the inflation rate or changes in the prices.
These causes the fluctuation in inflation of the price levels that may generate economic reforms which
will affect the financial performance overall. Because of this reason, the inflation rate is seen as the
leading economic indicator to imply the economic condition or performance of the country. Hence, price
stability and low inflation are also the main policy objectives targeted by policymaker (Elsevier B.V.,
2015). Future inflation is expected and plays an important role to determine the effectiveness of the
distribution of resources in a market system.

Moreover, when the oil price increases the burden necessarily shift over to the consumers in case there is
an abrupt change in the increase in the oil price. World oil price showed significant movements in the
past that there will be a sudden change significantly. However, these changes are due to the inelastic
nature of demand for oil, and its supply is getting short already that it tends to push up the price in the
world market.

The rise in oil prices affects our everyday lives in more ways than we know. It affects the cost of
production for businesses, it results in higher expenses for households, and it also increases the price of
correlated products such as gasoline. Another effect is that the market phenomena price change
represents a significant role in the economic world. The oil firms in the Philippines respond to changing
the market conditions as it is expected that the regulation of surplus and shortage are frequently
occurring. Even though, in general, if the oil price hike is viewed from the supplier's perspective, it is a
positive thing since they can sell their products at high prices without any change in the demand of their
customers, while on the downside this greatly affects the consumers in many different ways and from
different sectors of the economy. High oil prices also can reduce demand for other goods because they
reduce wealth, as well as induce uncertainty about the future (Sill 2007).
In this research, it is intended to find out how the economy, businesses, and the people, specifically jeep
drivers and other modes of transportation, are affected with these sudden price levels of oil in the
Philippines. It tackles how this paper will help other people in opening their eyes of how the changes are
occurring now, showing them the inescapable reality of how the world is struggling due to the increase in
prices of oil, and how the future regarding the matter still looks grim.

RESEARCH QUESTION

The study was chosen by the researchers because they are unaware how consumers are affected by the
Oil Price Hike. At the end of the study, the following questions are expected to be answered:

- How will people adjust when the government is increasing the price of the oil?
- How do the consumers cope up with the oil price hike?
- Why does oil price hike have a positive or a negative impact to the consumer?

OBJECTIVES

At the end of the study, the following objectives are expected to be done:

1. To be able to know how the commuters are affected by the oil price hike.
2. To be able to know how drivers, specifically the jeep drivers are affected by oil price hike
3. To know the cause and effects of oil price hike.
4. To know the regulations of oil price hike.
5. To be able to know the different kinds of oil that the consumers use.

THEORIES

The researchers used two sociological theories to show how consumers are affected when the
Government increases the price of the Oil
 REVEIEW OF RELATED LITERATURE

The Business profession is now in a state where oil prices are a significant problem in the
Philippines already. In this present society, oil is likely to increase in demand and fears of supply
disruptions have exerted upward pressure on oil prices. Global demand for oil has been growing,
outpacing any gains in oil production and excess capacity. The economies nowadays have become
increasingly industrialized and urbanized, which has contributed to an increase in the world demand
for oil (Brown, 2006).

Oil Price Changes Worldwide

Historical data show that oil price rose from $3 per barrel before 1973 to close $40 per barrel in
1979. Oil price also recorded a high increase from $15 a barrel in 1998 to almost $140 a barrel in 2008.
The consumer price index (1982 base year) compiled by Bureau of Labour Statistics, U.S. also showed
the same high jump from 41.10 (January 1972) to 86.30 (end of 1980) and then increased from 164.30
(January 1999) to 214.82 (April 2008). However, the strong correlation between oil price and inflation
may vary over time periods. Such strong relationship disappeared in the mid 1980s. (Evans and Fisher
2011). With the said data, the price of the oil has been changing over the years and it continues to grow
overtime. The changes in the oil price affect most of the consumers especially business firms that use oil
to produce a product.

Oil price changes also affect some business firms because of the said inflation.The rise in oil
prices usually comes with low productivity, but lower oil prices do not result in the higher productivity.
Firstly, the higher the price of the oil the more the business firms cut production so as to cope with
higher input costs, and a lower demand. Secondly, these lead to reallocation of energy sources, from
sensitive energy sectors into efficient sectors (Cunado and Gracia, 2003). In addition to this there are
some studies that suggest that monetary policy is also a reason for the said influence. Central banks may
tighten or loosen that deals with the influence of rising oil prices, while it is unchanged when oil prices
fall.

Adding to that, a research supporting that according to Maghyereh (2004) that the daily stock
that is found in general market returns from 1998 to 2004 in 22 emerging economies do not reasonably
signal shocks in the crude oil market. In contrast, Basher and Sadorsky (2006) investigated the daily data
from 1992 to 2005 of 21 emerging countries.

According to the U.S. Energy Information Administration, International Energy Outlook (2018),
China, India, and Africa are three of the most populated parts of the world. Their economies collectively
consume about one-third of all global energy, and their energy consumption is projected to grow faster
than the rest of the world through 2040. As a result, changes in these economies have significant
implications for global energy markets.

Inflation has a significant impact to the fluctuation of oil prices in the world. Oil has been a
necessity to consumers for everyday use and oil price inflation has been beneficial to the supplier’s rather
than to the consumers. Oil price inflation is a way for the people to learn how oil prices change within the
years. The researchers find the articles and researches important because they will learn how these
prices affect the consumers and it will be of help to them. Also, this study will be of help to the
researchers because it will serve as a guide for them for further knowledge of the changes of oil price in
the world.

Oil Price Changes in the Philippines

In the past weeks oil price changes is at its peak in four years according to Tracking Brent Crude
futures. An article highlighted that according to the Department of Energy, the averageMetro Manila
price per one liter of gasoline is now at PHP59.50. Diesel gas falls at PHP46.94, while kerosene is priced
at PHP52.57 (Cruz, C.A. 2018). Also, with the said data the government should immediately take action
for the unreasonable price hikes of petroleum products. As these products are beneficial to business firms
and other individuals that consumes it.

Also, the Philippines is a net importer of oil products, which means that the country’s fuel supply
is generally sourced from abroad, making the country vulnerable to the changes of oil prices. Adding to
that, with the same research aforementioned above Nandha and Hammoudeh (2007), used a weekly
data from 1994 to 2004 to find out that only Philippines and South Korea out of the 15 countries in the
Asia Pacific region are sensitive to changes in the oil price. Hence, the increase of oil prices in the
Philippines depends on the trade tension between the United States and China which have a high
demand for oil since these are industrialized countries.

Due to the inflation that the Philippines is currently undergoing, there are firms like PTT
Philippines, Pilipinas Shell, Petron Corporation, Chevron Philippines and some independent oil firms like
Total Philippines, Eastern Petroleum, Unioil Philippines, Petro Gazz, and Phoenix Petroleum also had their
fuel price increase (Reyes, E. 2019).

The Philippines is one of the moderately oil-dependent emerging countries, the relationship of oil-
related beta and stock returns have a significant and positive relationship during oil price changes in the
markets.The researchers find the study important because it gave them deeper understanding how the
oil price changes in the Philippines. The findings in these studies will be useful to know the current status
of the prices and if there is really a development regarding the oil price changes in the Philippines. This
review will be of help to the researchers because it will serve as a guide for them to know more about
the trends of prices in the Philippines.

History of Oil Price Hike

INTERNATIONAL

1. https://www.statista.com/statistics/262858/change-in-opec-crude-oil-prices-since-
1960/
2. https://inflationdata.com/Inflation/Inflation_Rate/Historical_Oil_Prices_Table.asp
3. https://www.macrotrends.net/1369/crude-oil-price-history-chart
4. https://economictimes.indiatimes.com/markets/stocks/news/possibility-of-price-
hike-positive-court-ruling-a-plus-for-nmdc/articleshow/68211484.cms

PH

1. https://tradingeconomics.com/philippines/gasoline-prices
2. https://www.rappler.com/business/223232-oil-price-increase-february-12-2019
3. https://www.doe.gov.ph/oil-monitor
4. MGA NEWS

Effects of Changes in Oil Price to Various Consumers

Considering the changes of oil price various consumers are affected and it is distinct that the
relationship of oil prices and profitability is seen clearly in most firms that is directly involved with the
petroleum industry. According to Beattie, A. (2018), industries can be divided into two main groups:
upstream and downstream companies. Upstream companies are directly involved in the exploration and
production of crude oil. While downstream companies refine and distribute the finished products,
including gasoline and diesel fuel.

Agriculture, plastics, chemicals, and healthcare are the four industries that are worried for oil
price changes. In the same article industrialized agriculture is a massive consumer of oil, for irrigation
andfor motorized transport. Next is Plastics, however, is represented by liquid petroleum gases and
natural gas liquids, but in some countries where oil and gas alike are used for the fabrication of “nurdles”,
small pellets that are a form of pre-production plastic that are made in millions before being carted off to
numerous factories for molding into plastic parts. About 3-4% of global oil production goes into plastics
manufacturing. Next is chemicals where crude oil is refined to provide raw materials for the chemical
industries. 80% of raw materials for cosmetics come from petroleum, including the majority of
components from all waxes, perfumes, dyes, shaving creams, shampoos and conditioners. Lastis
healthcare which uses bandages, artificial arms and legs alike, as well as glasses and heart valves, are
made from petroleum-derived products. The use of crude oil as a feedstock for pharmaceuticals makes
companies stand out like Bayer and Pfizer as major oil consumers (Dalby, C. 2014).

Evident as it may seem oil price change affects from various consumers and is continued to
spread even in other countries. Uses of oil are important and are a necessity to everyone. The
researchers find these articles to be important because they are continuing to learn who are most
affected if there is a fluctuation in oil prices. This review will be beneficial not only to the researchers but
also to those who will read this review because they will have an idea who will be the most affected if
these changes will still continue in the near future.
 METHODOLOGY

The study made used of the descriptive qualitative approach method upon gathering data
regarding the oil price hike. The researchers wanted to determine how consumers accept every time
there is an Oil price Hike.

The researchers’ purpose in doing the interview it to gather information about the consumers
who are the most affected in the Oil Price Hike. The interview is also a way to know the opinions or
thoughts of the consumers regarding the issue. The interview was conducted in selected places Metro
Manila. The researchers chose the Metro Manila because as we all know, Metro Manila is the center of
everything; culture, economy, commerce, education and etc. in which they will gather a lot of data
concerning to their study.

PRESENTATION OF DATA

ANALYSIS

CONCLUSION

RECOMMENDATION
 References

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